Virtualization Spending Continues to Rise

By Richard Adhikari (Send Email)
Posted May 16, 2008

Recession? Virtualization remains a hot seller, according to the latest quarterly survey by ChangeWave Research. In fact, the faltering economy may have a lot to do with virtualization's continued strong sales. Virtualization is designed to help companies reduce the number of physical servers they need, which means less spending on maintenance of servers, power and cooling. Fewer servers also reduces space requirements. It makes sense that companies would continue spending on technology that saves them money, Paul Carton, director of research at ChangeWave, told

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Of the 1,956 respondents to the survey, 18 percent said they will increase purchases of virtualization software in the next 90 days, up five points from the 13 percent recorded in January.

The planned investments in virtualization come at a time when overall software spending has tanked: 25 percent of the respondents planned to spend less on software during the second quarter of 2008, and only 12 percent planned to spend more, ChangeWave found.

That's a drop of three points and four points, respectively, from January.

These surveys are conducted among the ChangeWave Alliance's members, who total 15,000 senior technology and business executives in leading companies in select industries.

Carton said that with a survey base of about 2,000 software buyers, changes of one or two percent are "significant."

Thirteen percent of respondents said a general slowdown in business conditions and capital budgets was driving their company's purchasing decisions — four points more than in January and double the percentage of six months ago.

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"We've had two straight quarters of really tough results on spending," Carton added.

Twenty-six percent of respondents said their second quarter capital budget has been adjusted downward in the past 90 days, up from 22 percent; 8 percent said their second quarter capital budget has been adjusted upward, down from 11 percent; and 55 percent said their second quarter capital budget has remained the same, down from 56 percent.

Describing January as "awful" for software purchases, Carton said the Alliance has "never had negative numbers for capital spending like this in January" and that this is the first time capital spending is decreasing, which is "not a good sign for business spending".

Worst-Hit Software

The worst hit software categories are Enterprise Resource Planning (ERP), for which purchase plans dropped 11 percent from the January survey results; document and enterprise content management , for which plans to purchase fell 9 percent; and customer relationship management (CRM), where plans to purchase declined 6 percent.

The worst-hit companies in those categories include SAP,with a 12 percent loss in intent to purchase in the next 90 days, followed by Sage Software, with a 4 percent drop.

Also, 40 percent of the respondents said their company has no plans to buy software in the next 90 days, 2 percent more than did in January

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